Casino boss lost it all to conman

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Former Christchurch Casino boss Stephen Lyttelton had it all: loyal friends, political connections, a job paying an annual salary of $400,000 - and $680,000 in his bank account.

In February 2007 he met Loizos Michaels and threw it all away.

He abruptly resigned from the casino and went to live in a motel in Auckland, went public making outrageous and untrue claims against the casino industry, and handed over his life savings in cash to an alleged conman.

This dramatic change in behaviour had not gone unnoticed. Friends and family hired private investigators and worked for months to break his bond with Michaels, who was found guilty of 31 counts of fraud yesterday.

After an eight-week trial, Auckland District Court Judge Chris Field said Michaels was a liar. "After considering Mr Michaels' evidence in some detail, I am not able to accept his evidence on any matter of importance and I reject it," he said.

Private investigator Gary Howarth, of Thompson & Clark, started working on the case in September 2007. He said Lyttelton refused to listen to warnings and almost required deprogramming to "break the thought patterns" that had developed.

"It was like the bloody Moonies or something. How do you convince someone who doesn't want to believe?"

Martin Lyttelton, Stephen's brother, had serious doubts about Michaels after meeting him for coffee in mid-2007. "The guy just gets his claws into people, and gets them in deep. Cult leader is a good way to put it, and he's just got it down pat."

Judge Field also remarked on Loizos' ability to "create an atmosphere of psychological and financial dependency", particularly in the case of Lyttelton.

Two months ago, Stephen Lyttelton took the stand in Auckland District Court room No 13 for three days as the lead witness for the prosecution.

He was used by Michaels as the linchpin in an elaborate fraud, prosecutors said. Michaels played on his victims' dreams to obtain both their cash - more than $3 million in total from dozens of people - and their co-operation in his fictitious ventures.

The scam caught up senior lawyers, Lyttelton's close friend and National Party president Peter Goodfellow, Cabinet minister Gerry Brownlee and even All Black legend Jonah Lomu.

Prosecutor Christine Gordon said Michaels traded on the profiles of his victims to bolster his own credibility while draining their bank accounts dry.

"He played a brazen scam at the highest level, manipulating those he came across to gain more profile or cash or both."

Witnesses from Christchurch, Auckland and Australia's Gold Coast described how Michaels made extraordinary claims about his connection to wealthy families in Macau and sinister criminal gangs in Japan and Cyprus.

Three witnesses, including Lyttelton, told of believing that Michaels used a communications device implanted in an earpiece to communicate with a shadowy backer in Japan known only as "Uncle".

The only family connection known for certain is that of Michaels' sister, Helen Vassilakis, who is wanted by police in Victoria, Australia, in connection with $70,000 worth of fraud offences involving six victims.

A source said Vassilakis shared her brother's smooth-talking ways and penchant for gambling. But her alleged scam was nowhere near as sophisticated as his.

In the witness box, Michaels defended himself vehemently and played the victim, fully aware that the burden of proof was on the prosecution.

He claimed he had never taken money from investors, nor had he told anyone he was connected with wealthy overseas families, casino operators and gangs.

He said he had initially wanted nothing to do with Lyttleton, who had constantly pestered him while he was trying to play the Christchurch Casino's gaming machines.

"It wasn't love at first sight," he told the court.

It was Lyttelton who had taken advantage of Michaels, waged a smear campaign against his own employer and collected the ill-gotten cash for his own gains, Michaels said.

He was the victim of a conspiracy borne out by dozens of witnesses in New Zealand and in Australia, all coached and coerced by the Serious Fraud Office to help take him down.

But Judge Field was not swayed. Michaels' evidence was undermined by his "garrulous and evasive" demeanour when replying to questions from both defence and prosecution lawyers, the judge said. "My view is that the person who's been telling lies is Mr Michaels."

THE first, and most important, link in the con started in Christchurch in February 2007 when Michaels met Lyttelton after the former complained about the quality of coffee at the city's casino.

Michaels and his associate, George Plakas, had arrived on a flight from Australia on December 16, 2006, and they soon became known at Christchurch Casino as VIP gamblers who put up to $15,000 a day through the slot machines.

Lyttelton quickly struck up a friendship with the "knowledgeable" Michaels.

"We got on very well, actually, I liked him a lot. He had a great sense of humour," the former casino boss told the court.

Michaels claimed to be backed by wealthy families overseas as a "corporate raider" who was interested in acquiring SkyCity Entertainment Group, and made Lyttelton an offer he couldn't - and didn't - refuse.

Lyttelton's application to become permanent chief executive of Christchurch Casino had been rejected, and in the year before meeting Michaels he had applied for jobs at overseas casinos.

Michaels offered him a role running SkyCity after his planned takeover, and a position controlling a handful of casinos in Macau. The offered salary first started at US$1 million (NZ$1.22m), then doubled, and eventually turned into $12m.

Michaels even convinced Lyttelton that assassins were out to get him, but his new friend's security had prevented the hit from being carried out.

In May 2007 Lyttelton resigned from Christchurch Casino and moved to Michaels' Auckland base at the Edgewater Motel in Orewa, north of Auckland.

At the conman's request, he ran a media campaign making untrue allegations about corruption in the casino industry to try to drive down SkyCity's share price.

Michaels told him his future employers wanted him to put "skin in the game" to prove his commitment to the new venture.

Over two months Lyttelton drained nearly $800,000 from his bank accounts in cash and left the money under the seat of Michaels' silver BMW, he said.

After his own accounts were emptied, Lyttelton approached his brother, Martin, and Peter Goodfellow for loans.

It was these friends and family who first warned him about Michaels. Goodfellow told the court he advanced $114,000 to his friend, but refused subsequent requests for cash after meeting Michaels at a Viaduct restaurant in Auckland and having his suspicions raised.

"His clothes were not particularly sharp and his shoes were scruffy," Goodfellow said.

His older model cellphone also raised eyebrows.

"It was not the phone I would expect somebody of his claimed substance to have."

Martin Lyttelton came to similar conclusions after meeting Michaels, and he and Goodfellow made their feelings known to their brother and friend. Lyttelton ignored their warnings and went to Macau in September 2007, where Michaels had promised he would meet his wealthy new employer.

It was a long wait in Macau. In February 2008 Lyttelton flew back to New Zealand, having spent five months living in hotels waiting for a meeting that never occurred.

Friends and family hosted an intervention meeting in Auckland days after his arrival, where he was presented with evidence that the private investigator had unearthed that alleged Michaels was a conman - but Lyttelton refused to believe his life for the past year had been based on lies.

His supporters say they were hesitant at pushing too hard because they were concerned for his wellbeing. Lyttelton told the court he was "mentally numb" on his return to New Zealand.

He continued communicating with Michaels, partly to try to recover his money, and he described their last face-to-face meeting, in February 2008. "We went for a walk along the wharf area in Wellington. He said, gleefully, to me: ‘Now you're a broken man'. He wasn't far off the truth, frankly," Lyttelton said.

"You've got a combination of self-interest and a guy who sounds a really persuasive salesman. Once people are committed, they either have to cut their losses and admit they've been had, or carry on and desperately try to protect their self-esteem."

Wilson said the way Michaels cut his victims off from their support networks - such as moving Lyttelton first to Orewa, then Macau - sounded deliberate.

"That's a classic cult move - you remove people's traditional social supports. What you're doing is removing them from people who will say, ‘Have you really thought this through?' "

Wilson said although many of Michaels' claims sounded fantastic, people's minds were quite flexible and under the right circumstances even talk of assassins and ear implants could be believable.

"We believe what we want to believe - we have this thing called confirmation bias where we ignore things that aren't consistent with our world view," Wilson said.

He was not surprised Lyttelton, a well-paid executive and university-trained lawyer and accountant, fell under Michaels' control.

"The research on cults is it's not merely the credulous and gullible that fall sway to these things - it's a wide swath of society. There are lots of people out there who would go for the chance to realise their dreams."

But five months of friends and family chiselling away at Lyttelton's link with Michaels eventually had an effect. Lyttelton told the court of the last time he talked to the man for whom he had thrown away his job, life savings and reputation.

"I told him that my friends and family had advised me to go to the Serious Fraud Office about his actions," Lyttelton said of the phone conversation. "He just laughed down the phone and said, ‘Go for it'."

With the private investigator's help, Lyttelton started drafting the complaint that would lead to the prosecution. But this step was not without torment for Michaels.

In court, defence lawyer Peter Kaye quoted from a statement that Lyttelton made to authorities describing Michaels' role in his life: "He used my brain, you see, he milked that and squeezed it. He wanted me to stay forever and just continue to use my brain for nefarious purposes. I was just naive and gullible."

DRIVER PLEADS GUILTY IN AUSSIE

George Plakas, who the court heard was often a driver for Loizos Michaels, was imprisoned in June after pleading guilty in a Melbourne Court to defrauding dozens of Australians in 2007.

During this period, when he and Michaels gambled heavily at Christchurch Casino and lost $130,000, Plakas admitted to being wired more than $800,000 in cash from his investors, ostensibly to be invested in put and call options on the NZX.

In sentencing, Judge Mark Taft said Plakas had taken advantage of unsophisticated investors.

"You cruelly exploited them by shamelessly whetting hopes for great financial rewards, which were in truth too good to be true."